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Global Monetary Policy Monitor_Oct18

The number of central banks tightening monetary policy has increased, including hikes in the US, Argentina and Turkey

For the version with all charts and tables, please open the attached pdf file

In September, there were monetary policy decisions in 27 of the 33 countries we monitor. In developed countries, interest rates increased in the USA and Norway. In emerging markets, Argentina, Indonesia, the Philippines, Czech Republic, Russia and Turkey also raised rates. As a result, the number of central banks tightening monetary policy has increased.

In the U.S., the Fed decided to raise its benchmark rate by 25 bps, to 2.25% pa., in line with consensus, and signaled that additional gradual hikes may happen in the future. In the committee’s assessment, expectations of a tight labor market and a booming economic activity reinforce the need for these increases.

Still in the wake of increased global and domestic pressures, the Turkish central bank raised its base rate by 625 bps, to 24.0% pa., above the 325-bp hike expectation. A similar decision occurred in Argentina, where a 500-bp hike took the interest rate to 65.0% pa. In the Philippines, the central bank increased the rate by 50 bps, to 4.50% pa., in line with expectations. Central banks in Indonesia, Czech Republic and Norway delivered 25-bp increases, to 5.75%, 1.50% and 0.75%, respectively, all in line with consensus. On the other hand, Russia’s central bank surprised the market with a 25-bp hike, to 7.5% pa., due to possible pressures on prices stemming from a more adverse external scenario. In Brazil, the Copom maintained the Selic rate stable at 6.5% pa., but paved the way for a hike, in case it proves necessary.

In October, the highlight in developed countries will likely be a 25-bp hike in Canada, while in the Eurozone and Japan interest rates should remain stable. In Latin America, we expect the central bank of Chile to increase the interest rate by 25 bps.

For the version with all charts and tables, please open the attached pdf file